CBO predicts dip into Social Security

Published: Tuesday, August 28, 2001

Associated Press

WASHINGTON {AP} The sour economy and President Bush's tax cut will force the government to tap $9 billion in Social Security reserves this year, congressional analysts concluded in a report Monday, igniting a bitter political fight over the dwindling surplus.

"Houston, we've got a problem," said Rep. John Spratt, D-S.C., ranking Democrat on the House Budget Committee. He used the famous Apollo 13 line to underscore the pessimistic projections from the nonpartisan Congressional Budget Office.

The CBO report was scheduled for release Tuesday. It was obtained Monday by The Associated Press from congressional sources.

Democrats said the CBO update, coming less than a week after a sunnier White House budget forecast, would severely crimp the ability of the president and Congress to fund their priorities: increasing defense and education spending, providing a Medicare prescription drug benefit, paying for a new farm subsidy program and extending popular expiring tax breaks.

House Minority Leader Dick Gephardt, D-Mo., said the 10-year, $1.35 trillion tax cut is causing an "alarming fiscal crisis," draining away the surplus cushion just as the economic downturn is hitting home.

The CBO provides the budget numbers Congress is required to use.

The CBO now projects the total budget surplus for the fiscal year that ends Sept. 30 at $153 billion. That is down $122 billion from its May estimate but still an enormous amount.

The first installment of Bush's tax cut accounted for two-thirds of the reduction, with most of the rest due to dwindling tax revenues from the slowing economy, the congressional budget analysts said.

The CBO said the government will have to divert $9 billion in Social Security money to make ends meet this year, something Democrats and Republicans had pledged repeatedly not to do.

The White House Office of Management and Budget last week also forecast a shrinking surplus, but it projected a non-Social Security surplus of $1 billion this year and next.

Diverting Social Security money has no practical effect on the program, although it does prevent the government from paying down public debt as quickly as it otherwise would. Republicans blamed the economy for the shrinking surplus and argued that the tax cuts will help spark a recovery. House Majority Leader Dick Armey, R-Texas, said in a written statement that controlling spending will cure the fiscal woes. He noted that the Democratic-run Congress routinely tapped Social Security reserves in years past.

Democrats' "sudden concern for the surplus is a mask to disguise their true intentions  repeal tax relief and spend the money on more risky spending schemes," Armey said.